Business Failures

“Success is most often achieved by those who don’t know that failure is inevitable.”

by Coco Chanel.

“Only those who dare to fail greatly can ever achieve greatly.”

by Robert F. Kennedy.

“If you’re not prepared to be wrong, you’ll never come up with anything original.”

by Ken Robinson.

“Giving up is the only sure way to fail.”

by Gena Showalter.

When the dark clouds of failure fall upon us, we find that they are not as bad as we thought. On the one hand, most often, the way in which our mind has to work on extraordinary hours to shape possible disasters, is completely distant from reality. On the other hand, it has been shown that, on the path to success, error and failure seem to constitute the first step in most cases. Thus, failure is necessary for learning and, sometimes, it may be necessary to achieve business success at a later stage. Deepening a little more in this concept and learning from the mistakes of others is what we intend to do in this section.

Entrepreneurship

As with success, trying to define business failure comes across several difficulties. First of all, we find the ambiguity that accompanies the same term, and secondly, with the variety of degrees in which a project or company can be considered to fail. All this has caused that in the business world we discover different terms that can reflect what in a generic sense we could understand as a failure.

From a broad perspective, the business failure has been identified with the closure of the business. However, sometimes, using this identification can mean situations that reflect the non-continuity of the business by decision of the entrepreneur. We think, for example, in the case of businesses that close as a result of the sale of the company, or for illness or retirement of the employer.

Starting from a financial conception, failure exists when the company is located
in a situation of formal bankruptcy. Bankruptcy is a legal situation in which a person, company or institution cannot meet the payments that must be made (liability required), because they are superior to their available economic resources. The physical or legal person who is in bankruptcy is called a bankrupt. When the insolvent or debtor is legally declared bankrupt, an insolvency or insolvency proceedings proceed, in which it is examined whether the debtor can take part of the debt with his or her estate to the pending payment obligations.

From an economic point of view, it is understood that a project or company fails when its usual operations cease as a result of the loss of competitiveness in the use of resources.
From the perspective of the entrepreneur himself, the subjective consideration of the failure coincides with the one of the success, that is to say, it is perceived that it has failed when the objectives that were foreseen have not been reached .

Sources of Failure

There may be many factors that condition the success of a business project, in terms of failure the figures could be multiplied by one thousand. Thus, any attempt to tip the factors of failure would always be an attempt at approximation. Therefore, without intending to be exhaustive, in this section we will consider the most common errors that have been made in the context of the new companies and that has led them to the business failure.

Poor leadership

Among the main causes of failure of new companies, inadequate management and management practices occupy a privileged position. More often than we could imagine a priori, when analyzing the business failure of innovative projects, we discover many weaknesses and shortcomings in the business management of the business. The needs and problems that new projects are facing change and change every day. Therefore, knowing how to manage the priorities of the business at all times are the basis for good management. These priorities are sometimes materialized in the need to seek competent personnel, adopt policies for continuous improvement, create and lead teams, clearly define and redefine the objectives, etc. This means adopting very different roles and behaviors at all times. However, there are many cases of entrepreneurs who do not properly assume their manager role. Indeed, in this context, business failure has been attributed in many cases to the managerial inefficiency of entrepreneurs, who have proved unable to adopt the timely decisions in key situations. The lack of experience and foresight and the incapacity of the entrepreneur to surround themselves with the adequate people originate a large part of business failures.

Creation of Performance

Any business project implies that the entrepreneur must maintain a certain collaboration with other people. However, it happens that not always this collaboration provides the expected results. Hence, the personal disagreements generated over time between the entrepreneur and the partners, employees or people closest and most influential in the business world are important causes of failures.
Questions such as the salary to be received by each one, who has to spend more time in the business, or who will take the final decision, tend to consider themselves in the unpredictable business world and the unpredictable world of relationships. A prior and in-depth discussion of these and other issues related to the distribution of obligations and responsibilities help to avoid, or in any case reduce, the risks of failure that arise from personal issues and of staff Also, looking for people who share the same vision of the project, the main human values, commitment, loyalty to teamwork and the complementarity in knowledge and skills are some of the tips that are usually given to avoid failing to cause of problems in relationships.